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Introduction: The Securities and Exchange Board of India (SEBI) has issued a crucial circular, SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/13, dated March 05, 2024. This circular addresses the list of goods notified under the Securities Contracts (Regulation) Act, 1956 (SCRA), impacting the Commodity Derivatives Segment. The circular introduces thirteen new goods and alloys for metals, expanding the list from ninety-one to one hundred and four.

Detailed Analysis:

1. Notification Overview:

  • The Ministry of Finance, through a notification (S.O.1002(E) dated March 01, 2024), notified additional goods under clause (bc) of Section 2 of SCRA, 1956.
  • Thirteen new goods and alloys for metals have been included, such as Apple, Cashew, Palladium, Manganese, and various metals and their alloys.
  • The circular highlights the inclusion of alloys appearing alongside metals, resulting in a total increase of thirteen goods in the comprehensive list.

2. Contract for Purchase or Sale:

  • Another notification (S.O.1003(E) dated March 01, 2024) declares a contract for the purchase or sale of the right to buy or sell underlying goods, as per SCRA, 1956.
  • This supersedes a previous notification (S.O. 3743(E), dated October 18, 2019) on the same subject.

3. Master Circular Amendments:

  • The circular necessitates amendments to the Master Circular for the Commodity Derivatives Segment, replacing references to earlier notifications with the latest ones.
  • Relevant chapters and paras in the Master Circular now cite Notification No. S.O.1002(E) dated March 01, 2024.

4. Effective Date and SEBI Directives:

  • The circular is effective immediately from the date of issuance.
  • Recognized Stock Exchanges and Clearing Corporations dealing with Commodity Derivatives are instructed to make necessary amendments to by-laws and communicate the circular’s provisions to their members.

5. SEBI’s Authority:

  • Issued under the authority of Section 11(1) of the Securities and Exchange Board of India Act, 1992, the circular aims to protect investor interests and regulate the securities market.

Conclusion: SEBI’s circular signifies a pivotal move in the Commodity Derivatives Segment, expanding the range of tradable goods. Market participants and investors are urged to stay informed about these changes, while Recognized Stock Exchanges and Clearing Corporations are directed to implement necessary amendments promptly. This development aligns with SEBI’s commitment to fostering a robust and regulated securities market in India. The circular, along with detailed notifications, can be accessed on the SEBI website for reference and compliance.

***

Securities and Exchange Board of India

Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/13 Dated: March 05, 2024

The Managing Directors / Chief Executive Officers
All Recognised Stock Exchanges and Clearing Corporations having Commodity Derivatives Segment

Sir / Madam,

Subject: List of goods notified under SCRA, 1956

1. Ministry of Finance vide notification number S.O.1002(E) dated March 01, 2024 has notified list of goods under clause (bc) of Section 2 of SCRA, 1956, thereby superseding the earlier notification number S.O. 3068(E) dated September 27, 2016 issued on the same subject. The new list of goods notified vide notification dated March 01, 2024, includes additional thirteen (13) goods and alloys for five (5) metals, thereby increasing the list of goods on which derivatives can be launched from ninety-one (91) to one hundred and four (104). The list of additional (13) goods and alloys for five (5) metals is as follows:

Table 1

S. No. Goods Category
1. Apple Fruits and Vegetables
2. Cashew Dry fruits
3. Garlic Spices
4. Skimmed Milk Powder Dairy and Poultry
5. White Butter Dairy and Poultry
6. Weather Activities, Services, Rights, Interests and Events
7. Processed Products of Timber Forestry
8. Processed Products of Bamboo Forestry
9. Bitumen Chemicals
10. Cement Construction
11. Freight including trucks, railways, waterways, airways Activities, Services, Rights, Interests and Events
12. Palladium (including variants
such as coins, bars etc.)
Precious metals
13. Manganese Metals
14. Aluminium and Aluminium Alloys Metals
15. Copper and Copper Alloys Metals
16. Lead and Lead Alloys Metals
17. Nickel and Nickel Alloys Metals
18. Zinc and Zinc Alloys Metals

Inclusion of alloys of metals is appearing along with metals, hence, number of new goods has increased by thirteen in total list of goods of one hundred and four.

2. Ministry of Finance vide notification number S.O.1003(E) dated March 01, 2024 has also issued a notification declaring a contract for the purchase or sale of a right to buy or sell, or a right to buy and sell in future, such underlying goods, as notified under clause (bc) of Section 2 of SCRA, 1956. This notification supersedes the earlier notification number S.O. 3743(E), dated the 18th October, 2019 issued on the same subject.

3. Accordingly, in Master Circular for Commodity Derivatives Segment (hereinafter referred to as Master Circular) dated August 04, 2023, the reference drawn to earlier notification number S.O. 3068(E) dated September 27, 2016 is being replaced with Notification no. S.O.1002(E) dated March 01, 2024, as follows:

3.1. Para 2.1.1 of Chapter 2 in Master Circular shall read as follows:

2.1.1 Pursuant to the repeal of the Forward Contracts (Regulation) Act, 1952 (FCRA”) and amendment to the Securities Contracts (Regulation) Act, 1956 (SCRA”), the Central Government, in exercise of the powers conferred by clause (bc) of section 2 of the SCRA and in consultation with the SEBI, have vide Notification No. S.O.1002(E) dated March 01, 2024 notified the goods specified therein, for the purpose of clause (bc) of section 2 of the SCRA with effect from the date of the said notification.

3.2. Para 5.1.1 of Chapter 5 in Master Circular shall read as follows:

5.1.1 Underlying: Goods as notified vide number S. O.1002(E) dated March 01, 2024, under clause (bc) of section 2 of the Securities Contracts (Regulation) Act, 1956.

4. The circular shall be effective from the date of issuance.

5. All Recognised Stock Exchanges and Clearing Corporations having Commodity Derivatives Segment are advised to:

5.1 . take steps to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of this circular;

5.2. bring the provisions of this circular to the notice of the members of the Stock Exchange and Clearing Corporation as well as disseminate the same on their website; and

5.3. communicate to SEBI, the status of the implementation of the provisions of this circular.

6. This Circular is issued in exercise of the powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

7. The Circular is issued with the approval of the competent authority.

8. This circular is available on SEBI website www.sebi.gov.in under the category “Circulars” and “Info for Commodity Derivatives”

Yours faithfully,

Naveen Sharma
General Manager
Policy and Development 1 (Commodities)
Market Regulation Department
naveens@sebi.gov.in

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